The Australian Tax Office (ATO) has signalled it’s going after digital businesses in the “sharing economy”, releasing its views on tax for emerging technologies such as apps and websites.
Private drivers on the ride-sharing app UberX are primarily in the ATO’s sights, with people using online services such as the home-sharing site AirBNB and odd jobs site Airtasker also under increased scrutiny.
Speaking on ABC Radio’s AM, ATO deputy commissioner James O’Halloran said tax laws apply regardless of technology.
“The existing law applies equally whether the buyer or seller come together at a bricks and mortar business or via a mobile phone app or a website,” he said.
The ATO’s decision to classify Uber’s private driver program, UberX, which dramatically undercuts the cost of a taxi, as one for tax purposes, has been welcomed by the taxi industry and provoked protest from Uber’s Sydney-based HQ.
UberX drivers operated under the presumption that they were like most businesses, which have a $75,000 threshold before paying GST. However, all taxi drivers must have an ABN and register for and pay GST on the gross fare, regardless of how much they earn.
The ATO has given the drivers until August 1 to get an ABN, register and begin charging GST.
CEO of goCatch, Ned Moorfield said the move will go a long way to evening the playing field between local and overseas players when it comes to the GST treatment of services.
“For too long overseas participants have been able to benefit from the cost and operational advantages of not having to collect ABNs from suppliers and collect and report on GST – so we believe this move is a significant positive step in the right direction,” he said.
“This move provides greater certainty for all market participants and it now allows for competition on service offering, innovation and customer experience – rather than being hamstrung by an inequitable tax regime.”
Australian Taxi Industry Association CEO Blair Davies said his organisation wrote to the ATO last year about the anomaly.
“The ATO’s decision to make ride-hailing drivers register for GST and pay their fair share of tax, like taxi drivers, closes a loophole that should never have existed in the first place,” he said.
“Hopefully the ATO won’t stop with the ‘little fish’ UberX drivers but will go after the big fish as well. Uber is a huge private company that has come to Australia for one purpose – to make money.
“It’s completely reasonable to say to Uber then, that it should ‘pay its own way’, and that means pay tax on every dollar of profit generated by rides brokered in Australia,” Davies said.
Meanwhile, the taxi industry continues to push to get UberX shut down as both the NSW and Victorian governments launch legal action against the drivers for illegal activity.
In a statement in response to the ATO’s advice, Uber said it was “disappointed that the ATO has taken it upon itself to dictate government policy for the sharing economy by imposing a flawed interpretation of a law”.
The company argued that the way the ATO categorised UberX was “a convenient proxy because current and outdated regulations do not reflect ride-sharing as a new model”.
“Ride-sharing is not a taxi service. The vehicles involved in ride-sharing are not taxis or limousines, and participants can not accept street hails, can not wait at ranks and do not use taxi meters.
“It is a flawed argument from the ATO and one we will be challenging.”
Uber claimed that 9000 people working as UberX drivers would be “caught up in red tape” that other small businesses, including truck drivers, do not have to deal with.
“The typical UberX partner in Australia works for around 20 hours a week and takes home around $30,000 p.a. – well under the government’s threshold for GST,” Uber Sydney claimed.
The ATO’s James O’Halloran responded on AM that the ATO had been speaking to the industry “for some months to make sure we understood the current situation” and it was a “level playing field issue”.
“We can only apply the law as it currently stands and the level of income is not relevant for those providing taxi services and has always been the case,” he said.
O’Halloran said car-pooling and similar types of ride-sharing were not part of current tax laws.
In some instances letting out a room, letting out a parking space, doing odd jobs or other activities for payment or driving passengers in a car for a fare will mean that you are earning assessable income regardless of whether you are carrying on a business.
It lists the following activities as the “sharing economy”, which it also called “collaborative consumption” and “peer-to-peer” via a website or app:
- renting out or letting a room or other property for accommodation
- renting out or letting car parking space
- providing odd jobs, errands, deliveries or more skilled services on an ad hoc basis
- using a car to transport members of the public for a fare
ATO deputy commissioner O’Halloran told AM that “in relation to AirBNB and those types of operations, residential rent is not subject to GST but, as usual, people need to declare the income that they derive from such activities”.